The End of the U.S. Financial System as We Know It?

A number of Republican House members and staff, along with others who are plugged in,
are telling me that Nancy Pelosi and the Democrats will come back with a new bill
that includes all the left-wing stuff that was scrubbed from the bill
that was defeated today in the House.

As this scenario goes, the House Democrats need 218 votes, and they have to pick
up a number of black and Hispanic House members who jumped ship because
the Wall Street provisions, in their view, were too benign. So things like the
bankruptcy judges setting mortgage terms and rates, the ACORN slush-fund spending,
the union proxy for corporate boards, stricter limits on executive compensation,
and much larger equity ownership of selling banks through warrants will all
find itself back in the new bill. Of course, this scenario will lose
more Republican votes. But insiders tell me President Bush will take Secretary
Paulson's advice and sign that kind of legislation.

Personally, if this scenario plays out, I would probably withdraw my support
for the rescue mission and switch to plan B, which would center on the FDIC
and its bank-recapitalization powers. The bank-ownership issue, in particular,
could lead to heavy nationalization of America's financial system with a
three-house Democratic sweep in November.

I'm not forecasting, because I don't know the next bill's content.
And while McCain's polls are heading south, he could still win.
But a three-house Dem sweep to implement some off the very onerous provisions
being talked about could set up the end of the U.S. financial system as we know it.

I'm gonna wait and see. Obviously, the financial markets are in total collapse today.
And the economic outlook is suffering.

Tough day. One of the worst I can remember.